Production reports for oil and gas wells drilled into Ohio’s Utica shale practically sent state officials into orbit last week. The 2012 data, which showed oil and gas companies doubling production last year, led James Zehringer, the director of the state Department of Natural Resources, to gush that the state is at “the onset of an energy boom.” David Mustine, the managing director of JobsOhio, concluded “its best is yet to come.”
State officials project there will be 1,000 Utica shale wells by 2015, pumping out 7.2 million barrels of oil and 146 billion cubic feet of natural gas. For last year, the figures were 12.8 billion cubic feet of natural gas and natural gas liquids and about 636,000 barrels of oil.
Worth noting are the more cautious responses from industry leaders and analysts. Ohio’s new oil and gas drilling is just getting started, they point out, with the average production time for the state’s 87 horizontally drilled wells about four months. Oil production rated lower than expected, and the total for natural gas and natural gas liquids was fairly modest, Ohio not in the top 10 of states.
What will be telling as the industry develops is how production declines over time. That will indicate how long the energy surge might last. Another key variable is the price of energy, current low prices discouraging the development of expensive horizontal wells.
Meanwhile, environmental issues must be resolved, among them how to handle waste from hydraulic fracturing. Keith Faber, the Senate president, said last week that a severance tax increase could be considered, even though the House stripped the idea from Gov. John Kasich’s budget plan. Ohio’s current rates are low, with the potential that oil and gas drillers, not the state as a whole, will reap an outsized share of the benefits from a one-time resource. As welcome as the rising production numbers are, Ohio must proceed with caution, both in terms of economic projections and the environmental impact.